3 Days Left Until UGI Corporation (NYSE:UGI) Trades Ex-Dividend
UGI Corporation (NYSE:UGI) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 13th of March, you won't be eligible to receive this dividend, when it is paid on the 1st of April.
UGI's next dividend payment will be US$0.33 per share, and in the last 12 months, the company paid a total of US$1.30 per share. Calculating the last year's worth of payments shows that UGI has a trailing yield of 3.5% on the current share price of $36.63. If you buy this business for its dividend, you should have an idea of whether UGI's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for UGI
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. UGI is paying out an acceptable 56% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that UGI's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at UGI, with earnings per share up 2.0% on average over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. UGI has delivered an average of 9.3% per year annual increase in its dividend, based on the past ten years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy UGI for the upcoming dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about UGI from a dividend perspective.
However if you're still interested in UGI as a potential investment, you should definitely consider some of the risks involved with UGI. Be aware that UGI is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
